Lots more today on the financial plight of the Indiana State Teachers Association. First, here’s the text of the e-mail sent Tuesday by ISTA President Nathan Schnellenberger to activists about the situation. It doesn’t tell us anything new, except the use of the phrase “both of these situations” confirms what EIA reported yesterday – that ISTA’s red ink extends beyond the liabilities of the trust:
As you may know, the ISTA Insurance Trust has recently experienced a number of severe difficulties. Additionally, like most organizations in this economic downturn, ISTA itself is experiencing some financial distress that must be addressed.
In a response to both of these situations, Saturday afternoon the ISTA Board of Directors met in a special session and unanimously agreed to ask NEA to institute a Trusteeship over ISTA. The purpose of this trusteeship is to assure ISTA’s current financial viability and continued long-term success.
In response, NEA agreed to appoint a trustee. His name is Edward Sullivan. Ed has had a distinguished career in the NEA family. Until his retirement last year, Ed served for 24 years as the Executive Director of the Massachusetts Education Association. I have met with Ed, and I am confident that he will provide sound leadership as we work to resolve the financial issues that confront us.
Ed will have complete authority over the operations of ISTA. As he explained it to me, his mission will be keeping the regular business operations of ISTA running smoothly while exploring various financial options for the ISTA and instituting whatever corrections are needed.
Your elected officers and the Board of Directors will give Ed full support and cooperation for the duration of the trusteeship and ask that you do the same.
Federal law allows a union trusteeship to last for up to 18 months, so it may be a long time before ISTA members regain control of their state union.
Meanwhile, union documents reveal the problems of both ISTA and its insurance trust did not spring up overnight. I have posted on EIA’s Declassified page the IRS Form 990s for both the ISTA Insurance Trust and the union itself. Both documents cover the fiscal year 2006-07, but are the most recent available because they weren’t filed until the summer of 2008.
Don’t be daunted by the 281-page length of the trust’s disclosure report. The final 246 pages detail each individual foreign investment made. The key figures show that two years ago the trust had $17.5 million invested in publicly traded securities and $19.5 million in hedge funds and private investments. The trust ran a $2.7 million deficit in 2006-07, but overall was still $734,000 in the black.
Although the trust’s problems ballooned out of control over the next two years, ISTA’s financial disclosure report indicates its money problems were larger for a longer time. The union ran a $3.5 million deficit in 2006-07, and was already $728,000 in the hole from 2005-06, for a total deficit of more than $4.2 million.
In his speech to delegates last month, ISTA President Schnellenberger stated the union ran a deficit for the last two years as well, so that its total shortfall must exceed $4.2 million by some undisclosed amount.
NEA’s Sullivan will have wide discretion under the trusteeship to restore the union to fiscal health. Staff costs, particularly pension liabilities, are a problem even for healthy NEA affiliates these days. However, it is more likely that budget cuts and dues increases will be moderate, and that NEA will subsidize the affiliate’s operations until the situation improves.